Sports betting is a major player nationwide, but each state differs in its approach to taxation. [Image: Shutterstock.com]
The market is exploding
American sports betting was legalized with the repeal of the Professional and Amateur Sports Protection Act in May 2018, five years ago this month – and it has led to a frantic outpouring of support nationwide.
Americans bet more than $220 billion (roughly Portugal’s GDP)
37 states have legalized sports betting since the famous 2018 Supreme Court decision. Americans have bet more than $220 billion (roughly Portugal’s GDP) over that period, yet each state’s market has its own set of standards, one of which is the rate Tax.
But what is the effect of the tax rate on the longevity, profitability and sponsorship of bookmakers? What is the size of the discrepancy in the tax rate from one country to another? VegasSlotsOnline news sets out to answer these questions.
state-by-state tax
Here is a comprehensive overview of the sports betting tax breakdown in each state:
| state | % retail tax | % tax online |
| Arizona | 8% | 10% |
| Arkansas | 13% of the first $150 million and 20% on the remaining proceeds. | Unavailable * |
| Colorado | 10% | 10% |
| Connecticut | 13.75% | 13.75% |
| Delaware | 50% | 50% |
| Illinois | 15% | 15% |
| Indiana | 9.5% | 9.5% |
| yeah | 6.75% | 6.75% |
| Kansas | 10% | 10% |
| Kentucky | 9.75% | 14.25% |
| Louisiana | 10% | 15% |
| who | 10% | 10% |
| Maryland | 15% | 15% |
| Massachusetts | 15% | 20% |
| Michigan | 8.4% | 8.4% |
| Mississippi | 12% | Unavailable |
| Montana | Differs | Differs |
| Nebraska | 20% | Unavailable |
| nv | 6.75% | 6.75% |
| New Hampshire | 51% | 51% |
| New Jersey | 8.5% | 13% |
| New Mexico | Differs | Differs |
| New York | 10% | 51% |
| North Carolina | Unavailable | Unavailable |
| North Dakota | Unavailable | Unavailable |
| Ohio | 10% | 10% |
| Oklahoma | 15% | 15% |
| Oregon | Differs | Differs |
| Pennsylvania | 36% | 36% |
| Rhode Island | 51% | 51% |
| South Dakota | 9% | Unavailable |
| Tennessee | Unavailable | 20% |
| Virginia | 15% | 15% |
| Washington | Unavailable | Unavailable |
| Washington, DC | 10% | 10% |
| West Virginia | 10% | 10% |
| Wisconsin | Differs | Differs |
| Wyoming | Unavailable | 10% |
What do the numbers mean
Using the above information and analyzing performance in various state markets, we can draw several conclusions.
Lower tax rates are more conducive to long-term growth
First, countries generally find lower tax rates more conducive to long-term growth and harmony between them and sports betting operators. If we look at Pennsylvania and Illinois, which both have populations of about 12.5 million, the previously high tax rate of 36% seems to have held back progress. Illinois has already overtaken Pennsylvania in sports betting revenue despite launching 16 months later in March 2020, although Pennsylvania’s high rate means the state has nearly doubled Illinois’ tax.
The glaring exception to the rule is New York which, despite having a 10% tax on retail sports betting proceeds, takes 51% of the proceeds online. That hasn’t stopped Big Apple sportsbooks from achieving the highest average monthly revenue in the country since its launch, generating $1.36 billion in total gaming revenue in 2022. New York has received nearly $1 billion in sports betting tax ever, Although this started from the retail market launch in 2019.
Another conclusion is that, with the exception of New York’s online operations, the states with the highest tax rates (New Hampshire and Rhode Island) are located in very small markets. The reason for the high tax is the lack of local professional sports attractions, and the population is so small that the state needs to take other measures to provide the necessary financing.
On the flip side, states with strong and vibrant markets like Nevada, Ohio, Michigan, and New Jersey have lower tax rates than most other states. This is in line with the principle of supply and demand; The supply (for bettors) is much higher in these areas, so the demand (for a higher tax rate) is lower. New York and Pennsylvania stand alone as outliers on this matter.
Other factors to consider
While tax rates seem to have some effect on the overall profitability of sports betting, there are also a number of other factors that need to be taken into consideration. For example, it is very easy for countries with a higher population density to have more opportunities to turn people into players. States with local professional sports teams – especially successful ones – have a much easier time converting sports fans into real bettors.
Accordingly, Ohio State reported a first-month betting index of over $1 billion
For example, Ohio launched its sports betting market on January 1, 2023. By the end of the month, the Cincinnati Bengals had played three NFL playoff games, including the AFC Championship against the soon-to-be Super Bowl champions Kansas City Chiefs. Accordingly, Ohio State reported first-month index bets of over $1 billion and made a staggering $208 million in profits. For comparison, that’s more than what the 12 states with legal and active sports betting markets have achieved since Amoudi’s launch.
States also have ups and downs depending on the time of year in the sports calendar, and while that may not be unique to every jurisdiction, it helps if that state has teams that play at a certain time of year. Everyone loves to throw a March Madness bet, but bettors in Pennsylvania and Virginia will be more motivated to do so if Villanova faces UVA in the National Championship game.
The bottom line is that sports betting is here to stay. The majority of America has already legalized it, and most of the remaining countries are actively looking for ways to legalize it. Don’t be surprised to see continued growth and more and more blurring lines between simple rule sports and sports betting.
